ILA 201-I: Guarantee risk depends on behaviour as well as market paths
A long-term guarantee can interact with policyholder options and lapse behaviour. A model with fixed behaviour may omit an important risk even if the market-path simulation is detailed.
Original practice scenario
In an original scenario, low yields make a guarantee more valuable and may change lapse incentives. Compare fixed-lapse and behaviour-sensitive results, state how the behaviour assumption was chosen, and explain the limitation. Do not imply that a more complex model is automatically better supported.
Study check
Write the assumptions, the decision being supported and one limitation. Use the current course syllabus for the required terminology and scope; this introductory guide is not a complete course summary.
Reading sources
ActNet editorial guide · October 1, 2026 · Original illustrative examples.